This is an updated post from our original “What is Your Investor Net Promoter Score?” from May 2015.
It is not a secret that we love Net Promoter Score at Visible. The term “Net Promoter Score” has a corporate ring to it, making it seem like something that startups don’t need to worry about until they “grow up”. In reality, implementing a customer happiness metric like NPS is one of the most important (and easiest) things your startup can do once you begin to acquire customers. An accurate NPS helps you gain an understanding of how loyal your customers will be over the long term and what kind of word of mouth growth you can expect. But it isn’t just the happiness of your customers you should be worried about.
Investor Net Promoter Score for Startups
As a founder and executive team, part of the job description is keeping all of your key stakeholders engaged in the business and customers are just one of the groups you need to be attentive to. Your investors are another, which is why your Investor Net Promoter Score – the percentage of your investors who would recommend you to potential customers, key hires, distribution partners or follow on investors minus the percentage who wouldn’t – is also key to the long term success of your fledgling business.
In theory, your Investor Net Promoter Score should be 100. Why wouldn’t an investor recommend your product or your company culture to someone from the outside? If you close an important sale, bring on a talented engineer or find a new market for your product, your investor’s stake is worth more money, right?
In the real world, it isn’t that cut and dry. Investors, like startups, have resource constraints. More importantly, they have a reputation to protect. And while they want all of their companies to find success, their motivations change over time based on how engaged they remain in each of their portfolio companies.
The question is, if your Investor NPS is not 100 how do you get there?
How to Improve Your Investor NPS
1. Invest in investor updates. Build a regular cadence with your stakeholders.
Build a cadence and keep updates succinct as well as comparable. Consistent communication builds trust and keeps you on top of mind for your investors. Make sure to keep your metrics and format comparable from update to update. Ask for tips and preferences to tailor your updates to a format that is best for both you and your investors.
Take a walk in your investor’s shoes. When an investor comes across a great designer looking to join a startup, who do you think she will recommend? The company she hasn’t heard from since wiring the money, or the one that comes to her each month with a quick overview on how things are going and how she can help?
“The CEO is the investor’s user interface into the business” – Dharmesh Shah
2. Create a culture of candor.
While driving an internal culture of candor results in better decisions, execution and output, the same can be said when communicating with your external stakeholders. Don’t be afraid to share bad news. You are not alone, even though it might feel like it. Be frank about the state of the business and make the appropriate asks. At the end of the day, your investors have been in the same situation and are there to help you through “the struggle” or better yet, help you get to the next stage in your business.
“Investors can only help if you are transparent all the time, not just in good times.” – First Round Capital
3. Respect their time
As touched on before, investors are busy people. Whether they are investing on behalf of a fund or as an individual angel, it is likely that they have other portfolio companies and business ventures that they are dealing with on a daily basis.
Your goal should be to give your investors the ability to make the largest impact on your business with the least amount of exertion. When you are seeking advice or introductions, be specific. By doing this, you increase the probability that your investor will take you up on your request, helping to increase their engagement in your business and start a virtuous cycle of “Investor Success”.